International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Anticompetitive Effects of Vertical Territorial and Customer Restrictions and its Antitrust Regulation
Su Zhiying, Feng Feng

Nowadays, the legal system and practice of law enforcement in China still has not yet drawn a red line of vertical non-price restrictions represented by vertical territorial and customer restrictions. Combining modern distribution system practices with economic theories, this paper first analyzes the view that vertical territorial and customer restrictions would restrict normal arbitrage activities of vendors and consumers through economic theories and hamper free diffusion of commodities’ circulation efficiency to a certain extent so as to eliminate or restrict competition. It explained the anticompetitive effects caused by these restrictions, including facilitating price discrimination and price fixing and damaging consumer interest. In addition, taking the first judicial judgment on vertical monopoly agreement, i.e., Beijing Rubbing Company V. Johnson Company as an example, this paper illustrates vertical territorial and customer restrictions also lead to price controlling. It finally puts forward necessities of proper antitrust regulation and suggests China adopt the principle of general prohibition with certain exceptions. However, as to the specific exceptions that could be applied, this paper suggest their impacts of eliminating or restricting competition and effects on consumer welfare and social public interest should be considered under the rule of reason, which should be one of the areas in need of attention and research in the future.

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